Paying consistent additional payments on your loan principal yields singificant savings. You can pay more on principal by employing various techniques. Paying a single additional full payment once every year is probably the simplest to keep track of. If you can't afford to pay an extra whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Finally, you can pay half of your mortgage payment every two weeks. Each of these options produces different results, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.
Some borrowers can't manage extra payments. Remember that virtually all mortgage contracts will permit you to pay extra on your principal at any time. You can take advantage of this provision to pay extra on your mortgage principal any time you get some extra money. If, for example, you were to receive an unexpected windfall just a few years into your mortgage, you could pay this money toward your loan principal, resulting in significant savings and a shortened payback period. For most loans, even this small amount, paid early enough in the loan period, could offer huge savings in interest and in the length of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.